May 19, 2024

DealBook: Rajaratnam Lawyer Spars With Witness Over Clearwire Deal


At the insider trading trial of Raj Rajaratnam on Monday morning, his lawyer continued to spar with Rajiv Goel, a former Intel executive who has pleaded guilty to passing on confidential information about Intel to Mr. Rajaratnam.

The cross-examination by Mr. Rajaratnam’s lawyer, Terence J. Lynam, focused on whether that confidential information was material to a stock investor and therefore insider trading. It’s a theme that the defense has dwelled on during the first three weeks of the trial.

For instance, Mr. Lynam showed Mr. Goel a transcript of a phone conversation during which Mr. Goel told Mr. Rajaratnam details about a planned Intel investment in a new entity it would be forming with Clearwire, a fast-growing wireless business, and other companies. Among the details Mr. Goel shared was specifics about the composition of the board of the new entity.

Mr. Goel, an executive in Intel’s treasury group who worked with the company’s venture capital arm that would be making the investment, seemed excited by what he described as “heavyweights” on the board, naming a few including Paul Otellini, the chief executive of Intel, and Brian L. Roberts, the C.E.O. of Comcast. Mr. Rajaratnam then teased his old friend. Here’s an excerpt of the transcript:

Rajaratnam: Are you gonna be on it?

Goel: Don’t be silly . . . so, uh, point I’m trying to make is that it’s a pretty heavy hitting board.

Rajaratnam: Right.

Goel: So I don’t know if that has any bearing on valuation.

Rajaratnam: Uh hum. Nobody gives a [expletive] about valuation. [Laughs.] I mean that’s for you guys in the corporate world, you know that.

Mr. Lynam focused in on that exchange, highlighting that Mr. Rajaratnam didn’t care too much about it. He argued that even if the information about the composition of the board was confidential, it had no bearing on the Clearwire’s stock price and therefore wasn’t material nonpublic information. (The entire transcript is below.)

Prosecutors are continuing their redirect examination of Mr. Goel this afternoon. There is expected to be at least one minor witness after Mr. Goel before the government calls Adam Smith, a former colleague of Mr. Rajaratnam at the Galleon Group hedge fund. Mr. Smith has pleaded guilty to insider trading and is a main cooperating witness for the government.

March 20, 2008 transcript (U.S. vs Rajaratnam)

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